On August 10 2007 a new German law went into effect. Entitled “Einundvierzigstes Strafrechtsänderungsgesetz zur Bekämpfung der Computerkriminalität” (41st Criminal Law Amendment Act to Combat Computer Crime), the law essentially criminalizes distribution of security software.
Section 202c
Acts preparatory to data espionage and phishing
(1) Whosoever prepares the commission of an offence under section 202a or section 202b by producing, acquiring for himself or another, selling, supplying to another, disseminating or making otherwise accessible
- passwords or other security codes enabling access to data (section 202a (2)), or
- software for the purpose of the commission of such an offence,
shall be liable to imprisonment of not more than one year or a fine.
(source :Translated German Criminal Code)
While it seems like the law only deals with malicious software, it could just as easily include tools like nmap, which could be used either maliciously or to actually prevent attacks. The language of the law is too vague.
After the law was passed in 2007, many security companies relocated out of Germany to avoid possible persecution.
The Register, a well-known British IT news source, revisited the law in June of this year. According to the Register, so far nobody got charged because of the law. (Probably because everybody who could have been persecuted got out of Germany when the law was passed?).
There were some dismissed cases. The German government investigated, but decided not to persecute, the online magazine Tec-Channel. Somebody offered downloads of a password cracker on the website, however the government decided that “there was no intent to violate section 202(c)“.
The Germans will be angry when they find out about this. 
A German security company, Visukom, filed a lawsuit to declare the law unconstitutional. The case is still pending (it was filed more than 2 years ago) and will possibly get resolved this year.
American bloggers talked about the law quite a bit when it was first passed.
Slashdot had several posts about it. Example comment: “Germany is making sure that when they start a new world war, there will be no legal tools to crack their enigmas!” –But this is slashdot
Original Text of the “Criminal Law Amendment Act to combat computer crime” in German